Question

Bargain Deal, Inc., is a leading retailer specializing in consumer electronics. A condensed income statement and balance sheet for the fiscal year ended January 28, 2017, are shown below. Bargain Deal, Inc. Balance Sheet At January 28, 2017 ($ in millions) Assets Current assets: Cash and cash equivalents $ 2,066 Short-term investments 1,314 Accounts receivable (net) 1,207 Inventory 5,060 Other current assets 410 Total current assets 10,057 Long-term assets 3,678 Total assets $ 13,735 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 4,900 Other current liabilities 3,375 Total current liabilities 8,275 Long-term liabilities 2,234 Shareholders’ equity 3,226 Total liabilities and shareholders’ equity $ 13,735 Bargain Deal, Inc. Income Statement For the Year Ended January 28, 2017 ($ in millions) Revenues $ 39,573 Costs and expenses 38,162 Operating income 1,411 Other income (expense)* (74 ) Income before income taxes 1,337 Income tax expense 638 Net income $ 699 *Includes $161 of interest expense. Required: 1-a. Calculate the current ratio for Bargain Deal for its fiscal year ended January 28, 2017. 1-b. Calculate the acid-test ratio for Bargain Deal for its fiscal year ended January 28, 2017. 1-c. Calculate the debt to equity ratio for Bargain Deal for its fiscal year ended January 28, 2017. 1-d. Calculate the times interest earned ratio for Bargain Deal for its fiscal year ended January 28, 2017.

Answer 1

1-a 1.21 times

1-b 0.55 times

1-c 3.26 times

1-d 9.30 times

Step-by-step explanation:

The formulas and calculations are shown below:

1-a. Current ratio = Total Current assets ÷ total current liabilities

= $10,057 ÷ $8,275

= 1.21 times

1-b Quick ratio = Quick assets ÷ total current liabilities

where,

Quick assets = Cash and cash equivalents + short-term investments + Accounts receivable (net)

= $2,066 + $1,314 + $1,207

= $4,587

And, the current liabilities is $8,275

Now put these values to the above formula

So, the value would equal to

= $4,587 ÷ $8,275

= 0.55 times

1-c Debt equity ratio = (Total debt ÷ Shareholders’ Equity)

where,

Total debt = Total current liabilities + Long-term liabilities

= $8,275 + $2,234

= $10,509

And, the Shareholders’ equity is $3,226

Now put these values to the above formula

So, the value would equal to

= $10,509 ÷ $3,226

= 3.26 times

1-d Times interest earned ratio = (Earnings before interest and taxes) ÷ (Interest expense)

where,

Earnings before interest and taxes = Income before income tax for year + Interest expense + income tax expense

= $699 + $638 + $161

= $1,498

Now put these values to the above formula

So, the value would equal to

= $1,498 ÷ $161

= 9.30 times